When Traditional Culture Meets Modern Corporate Sustainability

The modern corporate responsibility movement is maturing. Evidence continues to build showing that sustainable business practices can help to mitigate risks and enhance opportunities. Data availability is improving and investors are increasingly integrating environmental, social and governance (ESG) issues into their analysis and decision-making to improve performance. What started off as a moral imperative is now being complemented by a material imperative, with the quantification of non-traditional issues holding the promise to accelerate market transformation. Thousands of individuals from all walks of life all over the world - Generation S - are now building a future where market activities also advance societal priorities.

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Already some CEOs are redefining the purpose of their companies to better integrate societal preferences in their corporate strategies, and many have started the sustainability journey to strengthen the ethical foundation of their organizations. For example, introducing new accounting standards to measure externalities such as CO2 emissions, and disclosure policies that shine light on supply chains and social impact.

Driven by transparency, regulation and stakeholder influence, long-term profitability is increasingly interwoven with social responsibility, environmental stewardship and sound ethics. But for a few CEOs the profit motive is not the prime reason why they pursue responsible and sustainable practices. For them, profit is simply a by-product. These individuals build organizations to realize their personal values and as leaders they walk the talk and inspire their employees for a common goal because it is their way of life.

One of the most interesting cases I have come across is the "Happy Enterprise Partnership", a recently established movement in China that uses ancient principles of governance to build successful organizations. At the center of the movement is Chairman Wu, the founder of the Suzhou-based Good Ark Electronics company, China's largest semiconductor manufacturer. He has introduced a new leadership style based on traditional Chinese values and wisdom.

Chairman Wu has forged an organization that puts employees and their families as well as clients at the center of everything. Their "happiness" is the explicit goal of everything he does. No effort is spared to achieve this goal. Based on wisdoms of Confucianism, Taoism and Buddhism, employees are motivated to learn these wisdoms and to apply them at the workplace and beyond. Eight educational modules are used to this end. They include humanistic care and education, environmental care taking, health and volunteering. The value of the company is defined by its contribution to society and success is measured by the happiness of its staff and customer satisfaction.

One only has to visit the company and talk with its employees to believe it. A highly motivated staff in a super clean environment is fully dedicated, working in collaborative teams to implement the values of this leadership style. A flat organization, employees work in teams. They are dedicated to continuous learning and improvements in areas such as capital maintenance, process planning and execution and waste reduction as well as personal health and caring for others.

The strong emphasis on education and learning is supported by generous social programmes, including over two years maternity and an extraordinary care taking for the environment (low carbon food is the main dish in the cafeteria - a huge garden outside the factory provides for fresh vegetable). By Western standards, Good Ark would easily come out on the top of most sustainability ratings. But Chairman Wu is reluctant to apply indicators and sustainability measurements. For him the exclusive focus should be on the foundation that grows and sustains the organization, its employees, their families as well as the local communities and the customers. Their happiness and satisfaction are seen as the root of the enterprise and nurturing them is what keeps the branches growing.

Chairman Wu's basic point of departure - investing in people, leading by example and using ethics of ancient China - seems to work. Good-Ark has grown steadily and since the introduction of the new leadership and management style in 2012, the stock value has more than doubled, output per employee has increased by over 60% and the share of rejected batches has decreased steadily from 3.6% in 2012 to 0.3% in 2015. With over 80% of its products exported to Europe and the US, client satisfaction is extremely high.

Indeed, a closer look at the management and governance of this enterprise shows similarities with modern management approaches as advocated for example by the Drucker society and recent stakeholder theories. But it transcends such definitions. With its grounding in ancient humanistic principles, its focus on people as a family and its deep appreciation of the natural environment, Good Ark is a shining example of how to build and run a modern successful enterprise.

The "Happy Enterprise" idea has already attracted the attention of other small and medium sized companies in China. Five more companies are currently embracing this unique leadership style, based on ancient principles and reshaping management, governance and mindsets. They include companies from diverse sectors such as textile, hotels and department stores. The plan is to grow the Happy Enterprise Partnership over time to 20 companies with the objective of showing that a humanistic approach based on ancient Chinese wisdom is viable and can serve as a counter point to the prevailing zeitgeist.

In world where the natural environment is too often poisoned by human activities, where corruption is endemic and the scourge of short termism is feeding inequalities, the "Happy Enterprise Partnership" is a most intriguing effort to restore harmony and care taking. Bringing ethics, values and morals into the heart of the enterprise is not only important in China. It is important everywhere. And I hope that it will grow and inspire organizations everywhere.

Georg Kell is Vice Chairman of Arabesque Partners and is the founder and former Executive Director of the United Nations Global Compact.